Pyxus International, Inc. (PYYX) Earnings Call Transcript & Summary

Hello, and welcome to the 2024 Pyxus International Inc. Annual Meeting of Shareholders. [Operator Instructions] It is my pleasure to now turn the meeting over to Pieter Sikkel, Mr. Sikkel, the floor is yours.

Good morning. I am Pieter Sikkel, President, Chief Executive Officer and Chairman of the Board of Pyxus International, and I welcome you to the company's 2024 Annual Meeting, which I'm pleased to call to order. I would like to begin by introducing the other members of our Board of Directors. John S. Alphin, Jamie J. Ashton, Patrick J. Bartels Jr, Robert D. George, who is our Lead Independent Director; Cynthia P. Moehring; and Richard J. C. Topping. In addition, I would like to introduce Ms. Flavia Landsberg, Chief Financial Officer; and Mr. William O'Quinn, Chief Legal Officer and Secretary of the corporate. Also joining the meeting are Robert Grosso and Carson McLean of Deloitte & Touche, the corporation's independent public accountants for the fiscal year ended March 31, 2024. Richard, Grosso and McLean will be available to answer appropriate questions during the discussion period later in the meeting, and we'll have an opportunity to make a statement if they wish to do so. I would also like to introduce Ms. Jesse Petti of Equiniti, who has been appointed Inspector of Election for this meeting. We will follow the agenda posted on the meeting website, first by conducting the business of our annual meeting. And upon adjournment, I will then report on our operating results and strategy. There will then be a period of general discussion, including responding to shareholder questions. Should you wish to submit a question during the meeting, please click on the messaging icon at the top of the left side of your screen, type your question into the text box, then click the send icon at the right of that text box. Before proceeding, I want to draw your attention to the rules of this meeting, which are posted to the meeting website. To access and view uploaded documents, please click on the document icon at the top of the left of your screen, then click on the document name to view. I would remind everybody that this is a business meeting and we intend to conduct it in a productive and professional manner. There are 3 items of business on the agenda for today's meeting as described in the notice of meeting accompanying our 2024 proxy statement. As no other matters have been submitted to the company for vote as provided under the advance notice provisions of the company's bylaws, only the items of business set forth in the notice of meeting will be considered at today's meeting. After all items of business have been introduced, there will be a brief period for responses to any questions on these items. Again, questions on other matters will be addressed after the formal business of the meeting has concluded. Moving now to the business portion of the meeting. I asked Miss. T to present a copy of the notice of this meeting and to report on the number of shares represented for purposes of establishing a quorum.

Mr. Chairman, I hereby present a copy of the notice of annual meeting, proxy statement, form of proxy and 2024 annual report, together with proof by affidavit of their mailing on/or about July 12, 2024, to each shareholder of record at the close of business on June 14, 2024. On the record day for this meeting, there were 24,999,947 shares of common stock outstanding and entitled to vote. I can report that there are at least 22 million votes represented in person or by proxy. Therefore, a quorum is present. On the basis of the tabulation made just before this meeting, 22,018,934 shares or 88.08% of the shares entitled to be voted at this meeting are represented by proxy. Each proxy card has been examined and approved and has been found to be in proper form. Of the individual proxies named in the proxy card Mrs. Landsberg and Mr. O'Quinn are in attendance and entitled to vote shares represented by such proxies.

Thank you, Miss. T. I now declare the polls open. Orders of legal proxies who have logged into today's meeting using their unique 11-digit control number provided to them may now vote their shares by following the instructions on the website. If you have previously submitted your voting instructions, there is no need to do so again. As described in the 2024 proxy statement, the first item of business at today's meeting is the election of 7 directors, each to serve a 1-year term expiring at the 2025 Annual Meeting of Shareholders. The Board's nominees for election as directors John S. Alphin, Jamie J. Ashton, Patrick J. Bartels Jr, Robert D. George, Cynthia P. Moehring, J. Pieter Sikkel and Richard J. C. Topping. The election of such nominees is now presented to this meeting whereabout. I would like to remind everyone that the Board of Directors recommends that you vote for the election of all nominees. [Voting] The second item of business set forth in the notice for this meeting is the ratification of the appointment of Deloitte & Touche LLP as independent auditors of the company for the fiscal year ending March 31, 2025, which is now presented to this meeting for a vote. As set forth in the proxy statement, the Board of Directors recommends that you vote for the ratification of the appointment of Deloitte & Touche as the company's independent auditors for the 2025 fiscal year. [Voting] Third item of business to come before the meeting is the advisory vote on the compensation of the executive officers named in the proxy statement. Commonly known as a say-on-pay vote. This advisory vote gives shareholders the opportunity to express their views about the compensation of the company pays to our named executive off. The result of the say-on-pay vote will not be a binding vote. The final decision on the compensation and benefits of our named executive officers remains with the Board and the compensation. However, the Board and the Compensation Committee value the views of our shareholders and will review the results of the vote and take them into consideration in addressing future compensation policies and decisions. The approval of the advisory vote on the compensation of our named executive officers is now deemed presented to this meeting for a vote. As described in the proxy statement, the Board of Directors recommends that shareholders vote for this proposal by approving the following resolution. Results that the shareholders hereby approve on an advisory basis the compensation paid to the company's named executive officers as disclosed pursuant to Item 402 of Regulation S-K, of the Securities and Exchange Commission in the company's proxy statement for the 2024 Annual Meeting of Shareholders. [Voting] The fourth item of business is the approval of the proposed amendment and restatement of the company's 2020 incentive plan. The proposed amendment and restatement were as described in the proxy statement increased the number of shares of common stock authorized to be issued under the plan by 1,020,000 shares. The plan as proposed to be amended and restated is included as Appendix A to the proxy statement. The effectiveness of the amendment of the 2020 incentive plan as adopted by the company's Board of Directors is not conditioned on the shareholders' approval of the amendment and restatement of the plan. However, if the shareholders do not approve the amendment and restatement of the plan and options awarded under the amended and restated incentive plan may not be eligible for treatment as incentive stock options for tax purposes. Further, if the shareholders do not approve the amendment and restatement of the company's 2020 incentive plan, the compensation committee of the Board of Directors will consider whether to run any further awards under the incentive plan. If the amount of shares issued under such awards, together with all other outstanding awards will exceed the amount previously authorized. The proposed amendment and restatement of the company's 2020 incentive plan is now being presented to the shareholders for their approval at this meeting. I wish to remind everyone that the Board of Directors recommends that you vote for approval of the amendment and restatement of the company's 2020 incentive. Now that all items of business have been presented, I will pause to see if there have been any questions or comments submitted on these matters. Thank you. I now declare the polls first. I will now ask Miss. T as voting inspector to report on the vote.

Mr. Chairman, each of the nominees for director named in the proxy statement has been elected. The appointment of Deloitte & Touche LLP has been ratified. The resolution approving on an advisory basis, the compensation paid to the company's named executive officers has been adopted and the amendment and restatement of the company's 2020 incentive plan has been approved.

You have heard the inspector's report. All director nominees have been elected. The appointment of Deloitte & Touche LLP as the company's independent certified public accountants for the 2025 fiscal year has been ratified. The resolution approving on an advisory basis, the compensation paid to the company's named executive officers has been adopted and the amendment and restatement of the company's 2020 incentive plan has been approved. Both totals for each of these matters will be reported by the company promptly in a Form 8-K report to be filed with the SEC. The matter for which this meeting was called, has been completed and the business meeting of shareholders is, therefore, adjourned. I will now report on the company's operating results and business strategy. Following that, we will respond to general questions submitted prior to or during the course of today's meeting. Fiscal year 2024 was an exceptional year for Pyxus, achieving both strong financial and an operational results. We work diligently to advance our long-term strategic priorities and took meaningful actions that align with our purpose to grow a better world. It was a year of growth and disciplined execution across our global operations, underscored by our team's collective and coordinated efforts to increase profitability, successfully accelerate customer shipments and improve operating cycle times and working capital efficiency. Operationally, we leveraged our diverse global footprint to grow our full year sales by 6.1%, achieving $2 billion in sales despite the ongoing global and supply conditions. We enhanced our competitive positioning in key markets and strengthened our margin through the strategic adjustment of our volume mix to capitalize on market dynamics and capture growth opportunities. Our improved gross margin and expense efficiency led to a 46.3% increase in operating income, while adjusted EBITDA grew by 22%, significantly outperforming our initial guidance and achieving the high end of our revised code. Throughout the year, we maintained our strong focus on managing working capital and cash flow, improving our total available liquidity. This improvement enabled our teams to accelerate our crop purchasing schedule in a highly inflationary and competitive environment to secure the additional inventory required to mitigate the effects of [ El Nino ] in certain markets, satisfying customer demand and established a strong inventory position heading into the current fiscal year. Continuing our focus on our debt and interest cost reduction. We were pleased to reach an agreement in March to repurchase a significant portion of the company's long-term debt at favorable terms. We began executing on the agreement to repurchase $122.5 million of long-term debt prior to the close of fiscal year 2024. And earlier this month, we announced the successful completion of the repurchase agreement. We believe our growing track record of solid working capital management, continuous improvement of our financial results over numerous quarters and improvements to our credit profile position the business to reduce our overall cost of borrowing, which is a continued area of focus for the business through fiscal 2025. In September, we introduced an updated organizational structure designed to align our core business functions with our strategic priorities to drive operational efficiencies improve organizational effectiveness and enhance stakeholder value. We believe this updated structure strengthens Pyxus as a forward thinking and agile company and that the progress achieved in fiscal 2024 emphasizes the positive impact of this leadership transformation. Throughout the year, we continue to execute our sustainability strategy. We were pleased to achieve leadership status from CDP [indiscernible] disclosure in the areas of climate change and supplier engagement, recognizing our unified approach to sustainable, transparent action. This achievement emphasizes our dedication to integrating sustainability into our business strategy and operations, helping to meet evolving regulatory and safe holder expectation. We also saw success with many of our social initiatives, both internally and in the communities where we operate. For example, in fiscal 2024, we announced a new partnership with the U.S. Agency for International Development or USA, designed to unlock former value in [indiscernible]. Under this partnership, our subsidiary, Pyxus agriculture limited Malawi and received U.S.A awards totaling $14.6 million to support our mutual goals of increasing the availability of high-quality land and smart groundnuts, boosting groundnut production and processing and supporting improved farmer livelihood and the communities in which the farmers live and work. These funds can complement our investments in groundnut production today and offset certain company's expenditures going forward. Portion of the funds would also contribute to our environmental targets related to counteracting deforestation and improving [indiscernible] health. Internally, we work to increase employee engagement and satisfaction, including the introduction of new employee benefits such as our quarterly global recharge day. In September, we launched updated company values. Following an internal cultural assessment process. Our star values, supported, transparent, adaptable and responsible represent the attributes of our company and our employees and how we strive to conduct business. These actions have helped improve our company culture, increase employee productivity and innovation and enhance financial performance. Fiscal 2024 was a pivotal year for Pyxus, and our accomplishments reflect the strength and discipline of our teams around the globe and demonstrate our ability to achieve short-term objectives while simultaneously progressing towards our long-term strategic goals. What we have achieved would not have been possible without the hardware and dedication from our teams around the globe and the ongoing support from our state home. Together, we have laid a strong foundation for Pyxu's long-term success. And I look forward to building on that momentum as we continue our journey to grow a stronger company and a better world. I'm now prepared to answer any appropriate questions. Composing a question, please identify yourself, state, whether you are a shareholder or represent an organization that is a shareholder and indicate the number of shares in the company held by you or the organization that you represent. There being no questions or comments, I would like to thank you for attending Pyxus Annual Meeting of Shareholders. This concludes the meeting. Thank you.